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Cornering the Market

It's rare in this retail-saturated country that a c-store operator builds a store where a market doesn't yet exist.

March 25, 2007, 08:00 pm

It's rare in this retail-saturated country that a c-store operator builds a store where a market doesn't yet exist.

But Valero Energy Corp.'s foresight to open a Corner Store in the undeveloped South Side of San Antonio, near the site of a future Toyota truck manufacturing plant, has paid huge dividends for the petroleum marketer. Valero was the first retailer – virtually first of anything – to open its doors in an economic development corridor long ignored by the local business community.

"We saw major growth on the North Side of San Antonio, but the South Side lacked that same growth," said Gary Arthur, Valero's senior vice president of retail marketing. "Though not far from downtown, there was virtually nothing there. Three years ago, when we heard about plans to build the Toyota plant, we challenged ourselves to find a site that would be a good fit for the traffic patterns we anticipated when the plant opened. We wanted to be the first retailer there to serve a growing community."

Resting at the prime spot at the intersection of Loop 410 and Highway 16, the store, which opened in July 2005 – a full 16 months before the first truck rolled off the assembly line – established a loyal following among construction workers; employees of the bank, fast-food restaurant and other new businesses being developed in anticipation of the plant's opening; and students and faculty of nearby Palo Alto College.

"When we opened, there was a tremendous amount of work being done with the building of the plant and the development of the surrounding infrastructure," Arthur said. "Now that the plant is open, it's exciting to see there is still a lot of construction happening, including rooftops and new businesses to support the growing areas. [Plus,] we're serving the plant's several thousand employees.

"We expect our competition to enter this market eventually, but we got here early and have a strong foothold. I think our customers will remain loyal to this new store, especially since it has great offerings and friendly employees. We are looking for more sites on the South Side to leverage our presence there."

The site, which is one of 140 corporate Corner Stores in Valero's hometown, is exceeding sales projections. In 2006, the store sold an average of 224,400-plus gallons of motor fuel per month. Inside sales averaged approximately $5,700 per day.

The 3,500-square-foot Corner Store, which sits on 1 acre of land and has 12 fueling positions, was the first in San Antonio to fly the Valero flag, rather than the legacy Diamond Shamrock gasoline brand.

"We've retained our competitive pricing strategy, but now consumers can see we've got the strength of a major oil company standing behind the fuel," Arthur said.

"There are many people right here in our hometown who do not connect Diamond Shamrock with Valero," he added. "We felt branding the gasoline was an opportunity as the largest refining company in North America to tie that to the retail network, where consumers get to know the company. Few consumers get to walk through our refineries, but they walk through our convenience stores every day. To those consumers, our store employees are Valero. They are the face of the company, and it is important we represent the company as best we can and ensure the consumer has a positive shopping experience."

To that end, the site is one of several in the chain to offer Valero's new taco menu as part of its more established Corner Cookin' program. It also features the company's in-store bakery offering and new coffee and fountain sets. About 20 percent of the store's area is devoted to foodservice.

"We've really tried to maximize the space in the store, developing food programs that allow us to work in as small a space as possible, while maximizing efficiencies," Arthur said.

The taco program, still in its infancy, offers customers freshly-made authentic breakfast tacos, lunch burritos and other fare.

"Especially in this part of the country, the tortilla is king, so it's important they are fresh and of the highest quality," Arthur said. The tortillas are prepared and pressed in-store and customers may order a custom breakfast taco, filled with any combination of scrambled eggs, bacon, refried beans, chorizo, sausage and potatoes.

Lunch customers at this site can select from a variety of fillings, including fajita chicken and beef, Spanish rice, black beans and refried beans, wrapped in 14-inch tortillas.

"It's been a huge hit in this store," Arthur said. "The quality of the food is fantastic. We worked with our vendors to develop these recipes and tested them extensively in kitchens off-site before we launched. We know that when it comes to fast food, you only get one chance to get it right."

A second Corner Cookin' program, developed with the help of ConAgra, will offer fresh sandwiches and kolaches, a sandwich similar to a fresh baked roll stuffed with combinations of meat and cheese. "Kolaches are wildly popular in Texas," Arthur said. "In January, we put the program in a new store in San Antonio and plan to expand it from there. We can use the same equipment and ingredients for our bakery, taco and kochale programs, so there is a real synergy and efficiency there."

A chain-wide investment in fountain equipment and product reset has the beverage mix varying by market, though both Coke and Pepsi products can be found in each store. Slow movers were eliminated and new products or double heads of fast sellers were added to the fountains, which feature 16 soft drinks. The new San Antonio store also offers flavor shots, giving customers the chance to customize their drinks.

This store also features Valero's new coffee program, now being rolled out chain-wide. The retailer's old – Continental-branded program, a Diamond Shamrock holdover, has been switched out with Javalero. The Javalero set uses Bunn brewers and soft-heat urns and features an increased throw weight, resulting in a stronger taste profile. In addition to the house blends, the store offers an espresso roast, which appeals to customers who enjoy heavy, dark varieties, and a "country of origin" variety, which changes each year. This year, a Kenyan coffee is being sold. Customers may add a variety of syrups, including French vanilla, hazelnut and caramel, and toppings, such as chocolate, nutmeg and cinnamon, to their coffee.

The rest of the store offers the chain's typical mix of cigarettes, candy, snacks and beverages, and a small amount of grocery products and health and beauty care. While there is some individualization of product mix outside the foodservice offer by market, Valero limits this to a small percentage of SKUs in each store.

"As more rooftops develop, we may add more HBC at the expense of something else, but we will look at that as the opportunity presents itself, and will rely on the store manager and area manager to help identify new products," Arthur said.